Correlation Between Fidelity Covington and Fidelity Metaverse

Can any of the company-specific risk be diversified away by investing in both Fidelity Covington and Fidelity Metaverse at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fidelity Covington and Fidelity Metaverse into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity Covington Trust and Fidelity Metaverse ETF, you can compare the effects of market volatilities on Fidelity Covington and Fidelity Metaverse and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fidelity Covington with a short position of Fidelity Metaverse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Covington and Fidelity Metaverse.

Diversification Opportunities for Fidelity Covington and Fidelity Metaverse

0.87

Correlation Coefficient

Fidelity Covington  Fidelity Metaverse

Very poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust and Fidelity Metaverse ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Metaverse ETF and Fidelity Covington is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fidelity Covington Trust are associated (or correlated) with Fidelity Metaverse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Metaverse ETF has no effect on the direction of Fidelity Covington i.e., Fidelity Covington and Fidelity Metaverse go up and down completely randomly.

Pair Corralation between Fidelity Covington and Fidelity Metaverse

Given the investment horizon of 90 days Fidelity Covington Trust is expected to under-perform the Fidelity Metaverse. In addition to that, Fidelity Covington is 1.22 times more volatile than Fidelity Metaverse ETF. It trades about -0.08 of its total potential returns per unit of risk. Fidelity Metaverse ETF is currently generating about -0.03 per unit of volatility. If you would invest  3,017  in Fidelity Metaverse ETF on December 27, 2024 and sell it today you would lose (108.00) from holding Fidelity Metaverse ETF or give up 3.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Fidelity Covington Trust  vs.  Fidelity Metaverse ETF

Fidelity Covington Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Covington Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Fidelity Metaverse ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Metaverse ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Fidelity Metaverse is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fidelity Covington and Fidelity Metaverse

The main advantage of trading using opposite Fidelity Covington and Fidelity Metaverse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Covington position performs unexpectedly, Fidelity Metaverse can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fidelity Metaverse will offset losses from the drop in Fidelity Metaverse's long position.

The idea behind Fidelity Covington Trust and Fidelity Metaverse ETF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.